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House panel sets hearing to reform Federal Reserve

FEDERAL RESERVE:Some politicians have criticized the central bank for its aggressive actions after the financial crisis to lower unemployment and stimulate the economy using unconventional tools such as a monthly bond-buying program and building a balance sheet that now exceeds $4.5 trillion. Photo: Reuters

WASHINGTON (Reuters) – Republicans in the U.S. House of Representatives, who have proposed bills to audit the Federal Reserve and to limit its policy mandate, on Monday set a hearing to discuss measures aimed at the U.S. central bank.

The title of the hearing is “Legislation to Reform the Federal Reserve on Its 100-year Anniversary,” according to a memo from the U.S. House Financial Services Committee. The notice did not cite any specific legislation to be discussed at the hearing, set for Thursday.

A spokesman for the committee did not return a call from Reuters seeking more details about the hearing. Committee Chairman Jeb Hensarling has pledged to demand more transparency from the Fed.

Some politicians have criticized the central bank for its aggressive actions after the financial crisis to lower unemployment and stimulate the economy using unconventional tools such as a monthly bond-buying program and building a balance sheet that now exceeds $4.5 trillion.

A Federal Reserve Spokeswoman declined to comment on the upcoming hearing. Republican lawmakers have grown more critical of the Fed and the powers granted to it under the 2010 Dodd-Frank financial reform law that was passed in response to the U.S. financial crisis of 2007-09.

Congressman Scott Garrett, a New Jersey Republican, introduced legislation this year that takes aim at the Financial Stability Oversight Council (FSOC), created under Dodd-Frank to monitor emerging systemic risks. The council comprises heads of the top financial regulators including the Federal Reserve, and is chaired by Treasury Secretary Jack Lew. The group can impose additional regulations on any financial firms large enough that their failure could destabilize the economy.

Garrett’s bill contains a number of measures to make the council more transparent.

Prior attempts to rein in the Fed include a 2012 proposal to subject the central bank to audits, which sailed through the U.S. House of Representatives. The legislation, written by Republican representative Ron Paul, whose anti-Fed crusade prompted a presidential bid and his grass-roots folk-hero status, was re-introduced last year.

Texas Congressman Kevin Brady is also sponsoring a bill that aims to strip the Fed of its low unemployment mandate, and to ensure the Fed only focused on price stability.

Brady also proposes to “end too big to fail” by reining in the Fed’s powers to rescue financial institutions, and to limit the Fed chair’s influence over monetary policy decisions.

(Reporting by Michael Flaherty; Additional reporting by David Lawder; Editing by James Dalgleish and David Gregorio)